Contracts worth more than £39 million pounds were awarded by Natural Resources Wales (NRW) without a proper business case and possibly in breach of state aid rules, says a National Assembly committee.
The Public Accounts Committee found that NRW did not put the contracts out to competitive tender, test the market effectively or properly inform the Welsh Government about its ‘contentious’ decision - something it is bound to do by its own governance procedures.
The contracts were awarded in 2014, but came under scrutiny in a report by the Auditor General for Wales published in March this year.
In mitigating, NRW refuted the allegation that the contracts breached state aid rules, asserting its own legal advice concluded it was within the law. NRW also stated it needed to move quickly to award the contracts to control the spread of a disease affecting larch trees, and that the decision was made by an experienced officer with detailed knowledge of the market.
However, the Committee found that NRW only sought legal advice on state aid rules after the issue was raised by the Auditor General for Wales - three years after the contracts were awarded.
One of the binding obligations of the contracts was that the sawmill operator open a new saw line in Wales, creating new jobs. However, in a meeting with the Committee, NRW were unable to say whether that obligation had been fulfilled, despite the deadline for completion due to pass a few days later.
Following the meeting it transpired the new saw line had not been opened by the sawmill operator.
The Committee has recommended NRW undertake a full evaluation of the governance arrangements surrounding contracting processes and review its delegation arrangements alongside its awareness raising of state aid law, public law and the processes for awarding contracts.
“We were not convinced by the evidence provided to us by Natural Resources Wales in refuting the Auditor General's findings” said Nick Ramsay AM, Chair of the Public Accounts Committee.
“There are serious concerns that NRW’s decision-making and contracting processes are unsatisfactory. This leads us to conclude that a serious error of judgement was applied in awarding a substantial contract to an individual sawmill operator without a full and open retendering exercise or robust market testing.
“NRW should undertake a full evaluation of the governance arrangements surrounding contracting processes and review its delegation arrangements alongside its awareness raising of state aid law, public law and the processes for awarding contracts.”
Read the full report:
Natural Resources Wales: Scrutiny of Annual Report and Accounts 2015-16
(PDF, 737 KB)